Mortgage rates are moving higher as 2026 nears its midway point. And sentiment has shifted when it comes to rate expectations as more housing market observers are predicting at least one rate hike this year — a stark contrast to the start of 2026 when multiple cuts were on the table and sub-6% rates seemed possible.
At HousingWire‘s Mortgage Rates Center on Tuesday, rates for 30-year conventional loans averaged 6.79%, up 6 basis points in the past week. Rates for 30-year jumbo loans also rose 6 bps to 6.81%, while rates for 30-year loans backed by the Federal Housing Administration (FHA) jumped 7 bps to 6.38%.
In the short term, rates have responded to the Federal Reserve‘s decision to hold benchmark rates steady for a fourth straight meeting, with stronger indications from Fed officials that a rate hike is more likely than a cut by the end of 2026.
A startling prediction was released Monday when Bank of America economists forecast three rate increases by the end of this year, which would bring the federal funds rate to a range of 4.25% of 4.5%, erasing all of the cuts made in 2025. But HousingWire Lead Analyst Logan Mohtashami called those actions “a bit too aggressive” and said they are unlikely to come to fruition.
“Core inflation had been picking up before the (Iran) conflict, so any rate cuts are off the table, even after the conflict ended. The conflict ending removed the worst-case scenario. However, for now, I have one rate hike planned for 2026,” Mohtashami wrote.
Interest rate traders hold similar views, according to the CME Group‘s Fed Watch tool. As of Tuesday, about 36% of those surveyed were predicting a 25-bps increase at the Fed’s next meeting in July — up from 18% a month earlier. Roughly half of respondents have penciled in a hike by September, while roughly one-quarter think there will be a 50-bps increase by October.
Impact on purchase, refi demand
Rising rates are likely to factor into summer home sales and have been suppressing activity over the past month. HousingWire Data shows that weekly pending sales remain higher than a year ago, but existing home sales — which lag the pending sales data by 30 to 60 days — are likely to slow in July, according to Mohtashami.
“Mortgage applications declined for the fourth time in five weeks, underscoring borrowers’ continued sensitivity to higher mortgage rates compared to earlier this year. Purchase activity remained above year-ago levels, but constrained housing supply in many markets, elevated home prices and ongoing economic uncertainty continue to weigh on would-be homebuyers,” Bob Broeksmit, president and CEO of the Mortgage Bankers Association (MBA), said in a statement.
Purchase application demand remains 3% higher than a year ago, the MBA reported. And consumer mentalities appear to be resilient despite affordability concerns. Bank of America survey data compiled in April and May shows that 53% of Americans would rather buy a home than rent or live with family — the first time in three years that a majority have expressed this view.
“The duration of the interest rate environment that we’re in today is now becoming a new normal, so versus the shock of movement from post-pandemic to the levels [near] 7%, now we’re consistently in this area, so this is a new normal from a market perspective,” Matt Vernon, head of consumer lending at Bank of America, told HousingWire.
“I think that is causing that clear inflection point in sentiment, where most Americans — or more Americans now — are thinking of homeownership as the preferred long-term choice.”
Refinance activity strong
Kyle Bass, production business manager at Refi.com, said that even with rates above 6.5%, more stability in recent weeks also seems to be supporting stronger refinance activity.
“For homeowners sitting on the sidelines, the question isn’t whether to refinance, it is whether you will be ready when the window opens,” Bass said. “This is why it’s more important than ever to prepare now. Those considering a refinance should complete the full pre-qualification process today, not because they’re ready to close, but because it reveals what needs to improve before they are, such as paying down credit card debt. Doing this now means you will be weeks ahead when rates reach your desired level.”
FHA loans, which represent about 17% of the mortgage market, also received a potential boost Tuesday when the U.S. Department of Housing and Urban Development announced a host of changes to the FHA’s single-family loan programs.
The U.S. Department of Housing and Urban Development (HUD) is rolling out 14 changes to the Federal Housing Administration (FHA)’s single-family mortgage insurance program, including less stringent appraisal rules, expanded flexibility for the 203(k) rehab loan program and simplified closing forms.
The updates impact FHA policies across the origination, servicing, quality control and appraisal realms. HUD said the goal is to remove outdated requirements, reduce administrative work and make FHA financing more efficient for both homebuyers and lenders.